Financial Factors That Affect Ppp Conditions

This paper aims to compare the Japanese Yen against the US Dollar over a five year period starting from 2005 till 2010. The exchange traded fund for Japanese Yen shall also be discussed in the paper and afterwards an analysis of both the currencies shall be presented. There are different factors that influence the exchange rate differences between any two chosen currencies. The effects produced by these different exchange rates can be of quite different intensity. The most common elements that have an impact on exchange rate difference include economic factors, socio political factors and other behavioral or technical factors also. The macroeconomic factors such as growth of a country, employment rate, gross domestic product etc. All

The United States is the world's largest deficit and debtor country and with Japan being the world's largest surplus and creditor country, are economies depend on having continues affairs through trade, capital flows and this plays a critical role in the world economy as well as a central role in overall relations between the two countries. Both are large industrialized and have provided their residents with an efficient standard of living. The U.S. economy is almost (2 ½) times larger than that of Japan’s compared both on a nominal and purchasing power parity (PPP) basis. See graph below for (1991-2014) GDP (USD) to compare with (2001- 2014)

The currency exchange rate has to be considered when the decision is based on cost figures of from two countries with different currencies. The Consumer Price Index (CPI) used to calculate inflation rate in a country has to be used in forecasting the future minimum wages as minimum wages are in proportion with the inflation rate.

remain subdued, and the unemployment rate is probably to rise to a higher level in a

In the last century 70’s, during the debate regarding economic industry, Freedman who is a simple proof of the hypothesis of the trade-off between inflation and unemployment is only a temporary phenomenon, the first. In addition, he believes that, in the long run, there is no such trade-off. Friedman correlation analysis on inflation and unemployment is his pioneering work in international economics. In a 1950 paper, Freedman is an advocate of free-floating exchange rate. This article written in a Bretton Woods Agreement, and the subsequent creation of the International Monetary Fund and its fixed exchange rate, the World Bank, is the prevailing wisdom. Freedman's analysis of how to exercise, a flexible exchange rate will improve the balance of payments is a pioneering adjust the real. He critically tears parameters, a flexible exchange rate would encourage instability and his position is about 20 years later, when the world moved to a flexible exchange rate system.

Table: 1, represents the results of regression analysis carried out with the dependent variables of cnx_auto, cnx_auto, cnx_bank, cnx_energy, cnx_finance, cnx_fmcg, cnx_it, cnx_metal, cnx_midcap, cnx_nifty, cnx_psu_bank, cnx_smallcap and with the independent variables such as CPI, Forex_Rates_USD, GDP, Gold, Silver, WPI_inflation. The coefficient of determination, denoted R² and pronounced as R squared, indicates how well data points fit a statistical model and the adjusted R² values in the analysis are fairly good which is more than 60%, indicates the considered model is fit for analysis. Also, the F-Statistics which provides the statistical significance of the model and its probabilities which are below 5% level and hence proves the model’s significance.

There has been a long standing controversy among the economist about the validity of PPP (Purchasing Power Parity) in the long run. The parity reveals that prices in two different economies should be identical to each other when they expressed in terms of the same currency. It is a central building block in the monetary models of exchange rate determination. One of the most common practices, to test the validity of PPP is through unit root test of real exchange rate. In this paper unit root test has been done based on the data on Bangladesh and its major trading partner India, to see whether exchange rate has unit root or not. It has been found out that the PPP holds i.e. real exchange is not trend stationary in the

Sulaiman D. Mohammad Department of Economics, Federal Urdu University, Karachi E-mail: Sulaiman1959@gmail.com Abstract The purpose of this research is to find out the empirical association among money supply, current account, exchange rate, and industrial production, for this purpose we have used (Johansen, 1988) co integration technique to analyze the long run relationship and Error Correction model to estimate the short run dynamics by using annual data for the period of 1975 to 2008. The domestic variables support

The research methodology is an indispensable process of the whole project that can help researchers collect useful information or data related to the subject they focus on. To put it another way, it is the way to achieve the goals of the research for researchers. The aim of this chapter is to describe in detail the method taken in the process of the study so that the whole research would be analysed and evaluated clearly. The specific purpose of the entire paper is to verify whether the theorem of PPP is established, which will be achieved through modeling by selecting the nominal exchange rate and the CPI within the selected countries (Japan and India).

Following the methodology section, this chapter is going to present the main findings of the PPP test and relevant information, graphs and tables will be shown as well. The purpose of this part is to provide key results of testing for PPP in order to facilitate the following detailed discussions. It is no doubt that this section can be viewed as the core of the whole project because it depends on a variety of econometric tools to evaluate the financial data. The findings consist of two major aspects: the one is on the examination of the strong version of PPP, namely APPP; the other is on the test of RPPP, also known as the weak form of PPP.

Heteroskedasticity Test Result for Model II F-statistic 0.714 Probability 0.722 Obs*R-squared 9.893 Probability 0.625 5.6 T test for Coefficient Significance The government expenditure variables were hypothesized to have a positive effect on GDP of the country. This implies that the coefficients on those independent variables are expected to be positive and a one-tailed test is appropriate. For Model

The analyses showed that all tested time series according to the ADF test are non-stationary and it was necessary to adjust the time series by differentiation. Based on the EG co-integration test, it was observed that the time series were not co-integrated and there was no positive dependence of GDP improvement due to the developments in M3 and bank loans to the non-financial private sector. These discoveries are consistent with economic theory and the findings of Fisher and Seater (1993) and McCandless and Weber (1995).

Analyze the SR & LR relationship between Ms & P by cointegration test and VECM.

Keminsky and Schumulkler (1998) studied the correlation between the time series of daily exchange rates and interest rates in Indonesia, Korea, Malaysia, Philippines, Thailand, and China using daily data during the second half of 1997. They found that the signs of this correlation are very unstable and concluded that interest rates in these countries should not be an exogenous variable.

Abstract This paper attempts to analyse Rp/US$ and Rp/Yen exchange rates over the period 1983.2-2000.3. Using the Box-Jenkins approach, we tested various models to explain the behavior of Rp/US$ and Rp/Yen. The results supported both interest rate parity and purchasing power parity hypotheses for Rp/US$ exchange rates. In the case of Rp/Yen, however, the results supported purchasing-power parity hypothesis rather than that of interest rate parity. Moreover, Frenkel-Bilson, Dornbusch-Frankel, HooperMorton model cannot be applied to analyse Rp/Yen fluctuation. This study, accordingly, calls an urgency to